1. Oil Is Exploding Higher
Oil is rising. At the time of writing, WTI is over $95 and Brent is over $100.
Who would’ve thought if a bunch of tankers get blown apart, the oil market would be impacted?
The war seems to be escalating, and higher oil prices are going to impact everything. Watch for demand destruction. That’s something not many are talking about.
Also, pay attention to diesel prices.
2. Yen Is Soaring And That’s Dangerous
The yen is soaring.
Over the past few days, there has been a significant move to the upside. Was it all intervention? Or was it the market too? Did Japan sell a bunch of its U.S. Treasuries too?
Mind you: the yen shooting higher while yields remain elevated is a super dangerous combination for the carry trade. This can end very badly.
Once again, possibly one of the biggest risks being overlooked.
3. Global Yields Remain Elevated
Global yields remain elevated, with U.S. 10-year yields at 4.8% and 30-year yields at 5.25%.
The argument being thrown around is that everyone is in sync, so it’s not really a problem.
Sure. But what about the debt that has been sitting there at low rates?
The bond market can break a lot of things.
4. Inflation, Bonds & Trade War
The ECB is likely to hike rates tomorrow.
We also get U.S. PPI tomorrow, and then CPI on Friday. All eyes will be on these numbers.
There are 10-year German bond and 10-year U.S. bond auctions tomorrow. Could be something the bond market is watching.
The trade war noise between the U.S. and Canada is very loud. Don’t forget that the fear of a trade war could potentially be much bigger than the trade war itself.
5. Gold, Bitcoin & Small-Caps
In August, gold ETF inflows were the second biggest on record, according to the World Gold Council. There’s also a lot of noise about how fund managers could be reassessing gold and buying/adding to positions. A gold rush in the making? Or just noise?
Bitcoin is consolidating.
Canadian dollar is strengthening a little bit against the USD.
FYI: higher yields generally hit small-caps hard.